Issue #33 - May 2005 A publication of Cooperative Development Institute www.cooplife.coop

Features: Co-op Conversion, CLL Profile: Duncan Hilchey
NE News: Co-op Marketing Update, L.I. Freespace  
Legal Matters: Insuring Your Co-op
Outside the Region: UK's Partnership Report
Bulletin Board: Don't Read This!
Values in Action:  (3) Equality and (4) Democracy 
CDI Services: Contact us FMI at info@cooplife.coop
Co-op Quiz:  You Were Right

Cooperative Development Institute is the Northeast's non-profit center for cooperative development. Contact us if you'd like assistance starting up a new cooperative or strengthening an existing one: info@cooplife.coop

Above photo: Member-owners of the National Grape Cooperative Association harvest their crop for Welch Food, Inc.


FEATURE
Converting to Farmer Ownership

In 1869, Dr. T.B. Welch, a dentist in Vineland, New Jersey, succeeded in pasteurizing Concord grape juice to produce a non-alcoholic sacramental wine. The company had a knack for garnering free publicity: in 1913, Sec. of State William Jennings Bryan caused a huge flap in the press when he served Welch's Grape Juice instead of wine at a full-dress, diplomatic function. A year later, the Secretary of the Navy eliminated alcoholic beverages aboard ship, and substituted Welch's juice. The company's first grape jam was produced in 1918 and initially scooped up by the US Army. In 1951, Welch's became an early sponsor of the Howdy Doody TV show. From its earliest beginnings, the company experienced steady progress. Then, in 1952, Welch's was sold to the National Grape Cooperative Association, a co-op of upstate New York growers whose commodity product had made Welch's great. For more than half a century, Welch's has continued its long and successful run as a farmer-owned business.

The path looks promising
How did the transfer of ownership from private investors to grape growers come about? When Jack Kaplan sold his molasses business and decided to sit out the Depression in upstate New York, he took up walking along the country roads around him. Upset by the run-down condition of so many of the old farms he passed, he dropped in at Cornell University to see what the experts thought. Their information led him to the idea that it was merchandising, more than anything else, that was the problem. And Jack Kaplan was "one crackerjack of a merchandiser."

So claims Murray Lincoln in his autobiography Vice President in Charge of Revolution, a chronicle of the cooperative movement in the first half of the 20th century. First, Kaplan bought a small grape juice plant. Then he learned that some Tennessee bankers were unloading a large grape juice plant in Westfield, New York. The story goes that he purchased Welch Grape Juice Company sight unseen.

It didn't take Kaplan long to start showing a profit, but he was having a problem with the local grape growers. Lincoln recounts: "I suppose there was some fear that he would corner the market in grapes. Jack simply couldn't understand why he couldn't buy all the grapes he wanted." Finally, Kaplan called on Murray Lincoln and asked, "Would you know how to turn Welch Grape Juice into a cooperative?"

The road gets rough
Right away there was tension. The lawyers were unable or unwilling to structure a corporation they did not believe would work. The managers feared that grower-owners would not be willing to pay them what they were used to getting.
When Kaplan couldn't convince the other owners, managers and attorneys to convert the plant to a cooperative, he asked Murray Lincoln to buy it for eight million dollars through Nationwide Insurance, the farmer-owned co-op Lincoln served as President. Lincoln turned him down, and Kaplan retreated. But three months later he was back, telling his managers that he was going to convert Welch's to a grower-owned cooperative. He offered the managers a retirement income from the new business and a block of stock in the old one. The farmers bought the stock of the new business, and took over the plant.

A smoother ride
At the end of the first year, the company showed a profit of more than $1.5 million. Each farmer got $38 per ton in patronage dividend, but rather than take it, they used it to pay off Jack Kaplan. When they had paid half the debt, they started handling it as a straight loan and could begin pocketing their dividends, which continued to rise.
"It would be idle to suggest that the cooperative would have been the success that it is without the astute, professional management that Jack Kaplan and his executives provided," Lincoln recounts. "As I told Jack later on, 'One of the reasons I didn't want us [Nationwide] to take it over, even when we had the money to do it, was that I was afraid we would lose your services and the services of your executives.' Farm co-ops simply were not prepared to pay the sort of salaries that Jack and his staff were accustomed to getting."

In concluding this story, Lincoln points out its greater significance: "As I see it, the Welch Grape Juice story is important because what happened there set a pattern whereby a great many other companies can be converted into cooperatives from the top down, in order to function in the future from the bottom up." FMI" www.welchs.com.

Editor's Note: Last February, a report on childhood obesity in the magazine Pediatrics caused a lot of bad publicity for 100% juice producers (a dwindling breed). The former chief of staff of Miami Children's Hospital publicly criticized the report, calling it a lost opportunity to educate confused consumers. JoLynne Wightman, Welch's senior scientist for health and nutrition, took a stab at it: "Grape juice has been singled out in much of the discussion of the study’s implications without acknowledging its considerable nutritional benefits. One hundred percent grape juice, made from Concord grapes specifically, not only provides Vitamin C [100% daily requirement in one serving] but an abundance of phytonutrients as well. Numerous clinical studies have shown significant cardiovascular benefits from drinking Concord grape juice, such as more flexible arteries, slowing oxidation of LDL cholesterol, and inhibiting platelet clot formation. Juice from Concord grapes was also found by the USDA to have higher levels of one important class of phytonutrients per serving than any beverage they tested. It provides a significant source of dietary antioxidants—delivering more than two times the natural antioxidant power of orange juice.

CL LEADER PROFILE
Duncan Hilchey
Strengthening Regional Reliance

How did you find out about co-ops and what was your first work with them?
My initial introduction to cooperatives was with the New Hampshire Agricultural Marketing Program as a VISTA worker right out of college, in the early '80s. I worked with the new Merrimac Growers Co-op to develop marketing opportunities. They were one of the first in the state to promote 'buy local'; roadside stands and pick-your-own were just starting to take off. I read a newspaper editorial that explained how the destruction of just six bridges across the Mississippi River would leave the Eastern U.S. with two weeks' food supply. Co-ops seemed to be a way to increase our regional food self-sufficiency.

What are some of the challenges agricultural co-ops face today?
One of the big issues with Merrimac was that managers of co-ops were between a rock and a hard place, with growers telling them how wonderful their product was and buyers saying the stuff wasn't marketable. The growers were 'back-to-the-landers' [urban transplants who came to homestead in the '60s and '70s] who'd moved from subsistence farming to producing a surplus. There was not enough quality control, but for them it was a major achievement to be producing a cash crop. Today, grocery stores are taking pride in offering fresh, organic, local produce and they're making a profit on it.
Another issue came out in a recent study of small-scale growers' cooperatives I conducted in my work at Cornell University's Community, Food and Agriculture Program [see CLL # 27 Nov. '04]. We found a great variation in basic business skills and level of professionalism among growers. We need to create benchmarks that help growers identify where they stand, how they compare to other growers and where they need to improve.

What are you working on now? 
At Cornell, we're working with the NY State Direct Marketing Association to develop a GIS-based marketing tool that will map demographics at the census level of any geographic area to identify pockets of potential consumers. Other types of businesses have used these tools for decades. Working with Farm Credit and CDI on a value-added dairy project in Schoharie County, we are looking for concentrations of highly educated females with children, of variable incomes, in or around the capital district. We know these households are most likely to buy local dairy products. In addition to this we're able to map information from surveys we take of New York consumers. We can take these profiles and using a proprietary mathematical tool developed at Cornell ("the fuzzy set theory") we can see patterns of information you can't see on a table or a chart. Then we can take this information to processors and distributors and say, 'These are the areas; these are the stores to approach. '

Co-ops still need to think in terms of local marketing. It's not so much about marketing as education around availability and benefits of products. Farmers need to see where they are in the food industry. If you don't understand that you're getting the shaft, you're cohorts in the worst possible situation. We need to help farmers de-commodify by unplugging from the mainstream food pipeline and plugging into the regional food system.

NORTHEAST NEWS
News from MOCA (Marketing Our Co-op Advantage)

Recently CDI undertook a survey of past participants in the MOCA program, joined by Tom Webb who--as then-director of St. Francis Xavier University's Cooperative Extension program--collaborated on the initial MOCA event held in Cambridge, MA in November 1995. One of CDI's sister co-op development centers, Cooperative Development Services, assisted with the survey of more than 190 organizations. The National Cooperative Bank (NCB) commissioned the project.
"There's a myth in corporate America that good business is different from business based on human values," says CDI's Lynn Benander, who worked on the survey and played a key role in developing the MOCA program. "It's important to show that you can run a business based on human values, but you have to document the success. There are several steps in a fully integrated approach. First, you need shared agreement regarding core values—what is the advantage to each stakeholder group? What are our ‘right relationships’ to one another? Second, you have to operationalize that agreement. You have to say how you're going to live those values. How will you pay your staff a living wage, pay your suppliers on time, and minimize any environmental impacts? And third, you have to document your progress. How do you measure success? Once you do this, your marketing is simple. Just tell people what you've done." A two-day MOCA symposium is being planned for later this year, at which best practices and case studies based on the survey will be showcased, and the final report's recommendations can be fully discussed by co-op managers, directors, development practitioners and other stakeholders.

In April, Tom Webb made a preliminary presentation at NCB's annual meeting. He referred to his extensive work with cooperatives in the United Kingdom, specifically the Oxford, Swindon & Gloucester Co-operative Society (see Outside the Region) and stressed, "We have to become different before we market the difference. We have to first create the difference, and have faith that businesses based on cooperative values and principles are resonant enough with humanity that they will have appeal. After all, they are really basic human values, so a business built on them ought to be attractive. And it is. It works." Tom Webb knows whereof he speaks, and he is walking his talk. After years of service with Co-op Atlantic as well as Director of Cooperative Extension at St. Francis Xavier University in Antigonish, Nova Scotia—where Moses Coady, J.J. Tompkins and others birthed the Atlantic Canadian co-op movement--Webb founded Global Co-operation and has for the past few years played a central role in the successful launch of the nation's only master's program in cooperative management. FMI: www.global-co-operation.com/ 

LI FREESPACE
Liberating Long Island Suburbs

The Long Island Freespace is a new multi-purpose arts and activism center in the heart of conventional suburbia. Its founders call it a "hollow institution" where the resources exist to support diverse types of activities, but members of the community fill in the content of the programs. In this case, the community is the population of Nassau and Suffolk counties, some of the most affluent neighborhoods in the nation. In fact, its rising living standard has led to a lot of out-migration as families are forced to sell or their kids have to move away to find work. Kevin Van Meter, who helped found the center and is its current executive director, says, "Long Island is not a place you move to. It's a place you move away from, never to return."
The founders of L.I. Freespace wanted to change that. Having been active in the social justice movement, they were convinced that making it easier for people to gather together was a key to building more stable and vigorous communities. Initially, the founding group of local progressive artists and activists focused on youth because they seemed to have the fewest opportunities to learn about and take more active roles in the world around them. Now, after three years of development, hundreds of people of all ages take part in educational, social and arts events each month. A resource center offers books, periodicals, videos and other resources, and the staff offers human resources to help groups implement their ideas.
Freespace is cooperatively run, with programming determined by what participants want and how much they can put into making it happen. "A women's collective started," Van Meter recounts, "with five people. Now it's a huge group, I don't even know how many members it has now. They do women-only shows, speak-outs and all-women craft markets. They do workshops on countering sexual assault and rape crisis support with women employees in the local high schools and colleges. They hosted a three-hour public discussion about gender issues, and 65 people attended. A 'Men Against Patriarchy' group formed from that."
Last month, Van Meter traveled to Philadelphia to take part in the first event hosted by the newly formed Eastern regional sector of the North American Students of Cooperation (www.nasco.coop). NASCO is known primarily for its work in assisting campus housing and student services co-ops and for its annual Institute where dozens of workshops cover pretty much every imaginable topic related to cooperatives. The Freespace director was pleased to find kindred spirits at both gatherings. He notes that several collectives have already formed from groups who meet at the center, and he looks at its potential as a launching pad for groups interested in affordable housing, affordable natural food, affordable health care and the like. As with the European model of 'social centers' and the 'info-shops' springing up around this country, Van Meter agrees that "the co-op strategy can solve a lot of different problems" with a little money, a lot of community support, and the space to let it happen.

Ed. Note: If you have books, periodicals, and other print or electronic resources to donate to the center's Alternative Media Library, send them to: Kevin Van Meter, L.I. Freespace, 23 Union Ave., Ronkonkoma, NY 11779. Kevin says "We'll probably be the only place on an island of 2.5 million people where people can find your contribution!" FMI: executivedirector@lifreespace.org.

LEGAL MATTERS
Insurance for Co-ops by Patrick J. Deluhery

Part of the co-op board’s oversight responsibility is to see to it that the co-op’s assets and people are properly insured. Board members are stewards of the co-op on behalf of the members, and maintaining sufficient insurance protection is part of the board’s duty of due diligence to the co-op and members.
Insurance is particularly a concern with smaller cooperatives since annual co-op income may not be sufficient to cover all the premiums they may need or want. If a co-op's income is insufficient to cover its premiums, the board must make a decision as to which insurance is most important right then. Hopefully, as income grows the co-op will be able to add more complete insurance protection.

Every co-op should have adequate property insurance to protect the co-op’s real estate and land holdings, including all leased facilities. Next, a good general liability policy will be needed to protect against lawsuits and other legal liability claims. If your co-op has vehicles, suitable vehicle insurance is a must. Depending on the co-op’s business or service, some form of professional liability protection may be necessary. The by-laws of most cooperatives provide for indemnification of the board, officers and employees if they are sued in the line of duty. Director and Officer Liability Insurance is purchased to fund this responsibility; it is often expensive, but well worth considering. There is also Errors and Omissions insurance, which reimburses the co-op for financial loss due to the negligence of it staff.

It is prudent to review the co-op’s insurance at least once a year to assure that the proper kind and amount of insurance is in place. Personally, I have found that cultivating a relationship with a good insurance agent is very important to getting good coverage at a fair price, and collecting promptly on a policy when a claim has to be made.

Ed. note: Patrick J. Deluhery is a Massachusetts-based attorney serving the legal needs of cooperative businesses in the Northeast. FMI: pdeluhery@aol.com. This article is intended to provide information and is not legal advice.

OUTSIDE THE REGION
UK Co-op Leader

On April 26, Dame Pauline Green, the UK's Chief Executive and General Secretary of Co-operatives, put the spotlight on the Oxford, Swindon & Gloucester Co-operative Society (OSG) calling it "part of the renaissance of the British Co-operative Movement." Green praised OSG for its continuing leadership in cooperative development, which includes its recent switch to the .coop Internet domain name. She commented, "This is a progressive society which understands the importance, as part of its day to day business, of explaining, and acting as an example of, our unique co-operative difference." OSG—first reported on in CLL #18, November, 2003-- is the largest regional independent retailer in its five-county region, with 125,000 members and more than 4,000 employees. The co-op includes six 'trading groups' focused on retail (food and other consumables), motor, funeral, travel, property, and childcare. On its web site it says, "Our guiding principles state that cooperatives are organizations, open to all persons able to use their services and willing to accept the responsibilities of membership. This means that members should use the services of their co-op and accept that the Society exists for the long term benefit of members with a responsibility to pass on its assets, built up by previous generations, to future generations."

Recently, OSG introduced state-of-the-art technology in its Headington (Oxford) store to demonstrate the cooperative difference through four key themes of health, the community, our world, and the cooperative. Plasma screens, interactive computers and color-coded display panels lead shoppers through the store with useful product information that relates to these themes: mini-documentaries and video clips of coca harvesters in Ghana and organic pork producers in rural Oxford, sales and specials information, meeting notices. OSG puts the 6th and 7th Co-op Principles--cooperation among cooperatives and concern for sustainable community--into action by donating one percent of profits to communities through a Co-operative Community Dividend that emphasizes small, locally controlled initiatives such as domestic violence and drug abuse. Another program that gives one half-percent of profits to "the creation, development, promotion and researching of other cooperative enterprises is currently unique in the UK's retail consumer co-ops." FMI: www.osg.coop

BULLETIN BOARD
Upcoming Events

May 9-10 Alternatives Federal Credit Union in Ithaca, NY presents Credit Path® for Practitioners to help credit union staff and community development professionals identify the needs of member-depositors and help them move toward greater financial self-sufficiency FMI: leslie@alternatives.org or 607-273-4611 x823.

May 12-16 Third Annual Building Co-operative Futures Conference in Saskatoon, Canada. FMI: http://bcics.uvic.ca/youthzone

May 16-20  CooperationWorks! Professional Development Program, "The Art & Science of Starting a Co-op Business" Session One (Madison, WI). The only training program in the nation for cooperative development practitioners and those who wish to become same. FMI: www.cooperationworks.coop

June 5-10  Marketing Management School presented by Credit Union National Association (Madison, WI). Some of the strongest brands in America -- Harley Davidson, Iams pet food, and Harvard Business School -- were built with small marketing budgets and innovative ideas. FMI: Tel. 800-356-9655 ext. 4864 or: lbjorgo@cuna.coop

June 9-11  49th Annual Consumer Cooperative Managers Association conference, "Who's On First? The Value of Values" (Albuquerque, NM). FMI: www.cals.wisc.edu/ccs

June 27-30  Bologna Summer Program for Co-operative Studies, Economics and Management of Co-operative Enterprises, Vancouver BC Session 1 (Session 2 is in Bologna, Italy July 4-22). FMI: http://www.bcca.coop/programs/bologna.htm

June 30  Registration deadline: International Cooperative Alliance General Assembly (September 21-23 in Cartagena, Colombia). More than 2,000 cooperative leaders from around the world will discuss how to use co-op values to expand business. Sector meetings for agriculture, housing, consumer, banking and credit cooperatives. FMI: www.

July 15-17  Fourth Eastern Conference on Workplace Democracy at Southern New Hampshire University. FMI: info@east.usworker.coop

July 20-22  Northeast Co-op Council Cooperative Leadership Conference (Batavia, NY). Hosted by Western New York Farm Credit ACA. FMI: Brian Henehan at 607-255-8800 or bmh5@cornell.edu

November 7-8  Eighth Annual Farmer Cooperative Conference (Minneapolis, MN). "Cooperative Opportunities in a Global Economy”, sponsored by UW Center for Cooperatives. FMI: http://www.wisc.edu/uwcc/farmercoops05/index.html

Announcements

Mid-Atlantic Alliance of Cooperatives has introduced a new bimonthly e-publication “Training Toolbox” to help "co-op board members, management and other employees, and owners…perform their various roles in making their cooperative a success." FMI: info@maacooperatives.org.

The National Farmers Union unveiled a new web site last month that allows producer cooperatives to make direct connections with consumers across the country. The site links users with a searchable database of U.S. family farm and co-op controlled businesses and/or other rural businesses categorized by product groupings such as location, growing practices, available products, specialty products, and niche items. FMI: www.e-cooperatives.com.

Kingdom County Co-op in St. Johnsbury VT seeks a dynamic General Manager for small but rapidly growing co-op. A passion for good food, retail experience, knowledge of natural food products, and an understanding of cooperatives helpful, as well as strong leadership ability, basic business and marketing skills and administrative competence. Send cover letter, resume, references and minimum salary requirements to David Eyler, 930 Mud Hollow Rd.,Concord, VT 05824.

Vermont Credit Union League President Joe Bergeron addressed the NCBA Annual Meeting in April the same day H.149 was slated to pass the state legislature and be sent to Gov. Douglas for his signature. The bill seeks to reform outdated credit union laws, and was energetically opposed by the banking industry as part of a nationwide campaign to make depositor-owned credit unions subject to the same regulations as investor-owned, highly speculative and profit-maximizing multinational banks (for the full history of the bill go to http://www.leg.state.vt.us/database/status/status.cfm and enter the bill number). In his remarks, Bergeron said, "Co-ops can't afford to be quiet while others misrepresent who we are...It's important to work with those for whom understanding co-ops does not come easily." He added, "Each of us must take a politically active role every single day, not just when it's convenient."

Cooperative Fund of New England celebrates its third decade with its most successful year ever. In 2004 CFNE placed more than $1.8 million in loans to 29 cooperatives, employee-owned businesses, and community non-profits. Executive Director Rebecca Dunn adds, “At the same time, we received over one million dollars in new investment loans, and unlike many community development financial institutions, our operations are self-sufficient.” Equal Exchange's Erbin Crowell, President of the Fund, identified CFNE’s long track record as a key factor in its continuing success. “More and more investors are looking for ways to support socially-responsible and community-based economic initiatives that make a difference,” he said. “Our investors know their money will be put to good use, and our borrowers know that they are not only getting a collaborative lender, but by borrowing from the Fund, they are enabling us to support more co-ops and community initiatives.”
Social investors in the Fund represent a broad range of sources, including more than 135 individuals and organizations such as the Adrian Dominican Sisters, Calvert Foundation, Chittenden Bank, Haymarket Peoples Fund, Tzedec Economic Development Fund, and US Treasury CDFI Fund. FMI: Tel. 800-818-7833 or: www.coopfund.coop

CO-OP VALUES IN ACTION
(3) Equality and (4) Democracy, the River Valley Way

The last time we wrote about River Valley Food Co-op in this section of CL Leader, we told you about their grassroots membership drive in which many of the members put lawn signs out to show they belonged to the co-op. For years, the members have built their enterprise as they searched for the right site for a natural food grocery. This August, construction will begin on a 15,000 square-foot building that will be designed to utilize energy efficiently. The energy-saving aspect of the building came about, says General Manager Rochelle Prunty, because members took the initiative to pursue a $406,000 'green building' grant from the utility check-off program, the Massachusetts Technology Collaborative. The fact that the new store is in one of the two lowest-income census tracts in Northampton, Massachusetts helped them qualify for the grant. The co-op also worked with CDI on the project.

More recently, members launched a loan fund that will make it possible for people to join even if they can't come up with the $150 in equity right up front. In April the co-op held a 'Soup Supper' that got the fund off to a good start with $5,000 in member donations. This member driven 'micro-enterprise' is one more example of River Valley Food Co-op demonstrating how democratically run businesses can be great incubators for good ideas. Such as making co-op membership accessible to as many people as possible, because equal access to democracy is always a good idea.

Each month we tell stories that embody one of the Seven Co-op Principles or two of the Ten Co-op Values approved by the International Cooperative Alliance www.ica.coop/ica/. We are eager to hear YOUR suggestions!

CDI SERVICES
FMI: (413) 774-7599 or info@cooplife.coop.
The Cooperative Life Leader is produced as a service to the regional community by the Cooperative Development Institute, which is dedicated to developing and strengthening cooperative enterprise in the Northeast. CDI staff and consultants provide comprehensive support services, including the following:
* Customer service training
* Annual evaluations (manager, board, co-op)
* Business and strategic planning
* Executive search
* Board and management development
* Membership development
* Cooperative start-ups
* Fundraising
* Legal and personnel issues
* Public policy advocacy

CO-OP QUIZ 33: What co-op organization program assisted 3,700 co-ops, member-owned businesses and community-managed services in 2004 outside the United States, and what co-op based in the Northeast helped that organization produce a video on the program?

Answer to Q32: Benjamin Franklin (1706-1790) was the primary organizer of the Philadelphia Contributorship for the Insurance of Houses from Loss By Fire–the oldest fire insurance company and operating cooperative in the nation, and the first successful mutual insurer in the country. The co-op had far-reaching influence on the philosophy and conduct of the insurance industry. Organized for the benefit of its policyholders, it proved the wisdom of the mutual idea whereby, as Franklin said, “every man might help another, without any disservice to himself.” Thanks for this nugget to the Cooperative Development Foundation's site on Co-op Hall of Fame inductees (Ben Franklin was finally inducted in 1987). FMI: www.heroes.coop

TO CONTACT COOPERATIVE LIFE LEADER

Send your news and comments to lbroussard@cooplife.coop. To subscribe, unsubscribe, or for FMI on a program or event contact us at info@cooplife.coop. Please feel free to forward this newsletter to your colleagues.

Cooperative Life Leader is supported by a grant from the United States Department of Agriculture's Rural Development program. In accordance with federal law and US Department of Agriculture policy, this Cooperative Life/Cooperative Development Institute is prohibited from discrimination on the basis of race, color, sex, religion, age, disability, marital or familial status. To file a complaint of discrimination write USDA, Director, Office of Civil Rights, Room 326-W, Whitter Building, 1400 Independence Avenue SW, Washington DC 20250 or call 202.720.5964 (voice and TDD). USDA is an equal opportunity provider and employer.

Cooperative Life Leader Staff
Lynda Brushett, Senior Editor
Jane Livingston, Editor
Laurie Siggillino Broussard, Production Manager